TRAI moots drastic ADC cutTelecom tariff to tumble
New Delhi, February 19
The telecom tariff, specially the STD call rates are likely to fall significantly with telecom regulator, TRAI proposing to reduce the levy paid by private operators to BSNL by a whopping over Rs 1,900 crore.

Kalam roots for tablet PC
Bangalore, February 19
Citing the successful joint venture of India and Russia to harness the core competencies of the two nations for the benefit of humanity, the President, Dr A.P.J. Abdul Kalam, today called for a joint design, development and manufacturing of hand-held tablet PC with multilingual capability.

Be open minded on Mittal bid: UK
New Delhi, February 19
Be open minded, this is an era of globalisation, is Britain’s piece of advice to its European partners opposing Mittal’s Arcelor takeover bid.

Middlemen in farm trade may be taxed
New Delhi, February 19
It is now official. The Finance Ministry is clueless about the income of middlemen dealing in agricultural marketing, moneylenders and wholesale traders in agricultural products, though their income amounting thousands of crores is subject to tax under the provisions of present IT Act.

Videocon mulls oil exploration abroad
Haldia, February 19
Videocon Industries Limited, a major player in the consumer electronics and oil exploration businesses, today said it is planning to venture out into overseas oil exploration.

MFs may sell realty units soon
New Delhi, February 19
After allowing small investors to own gold assets en route mutual funds, SEBI is set to come up with another set of guideline to enable investors reap the benefits of the real estate sector boom.

Tax Advice
Salaries of Indian employees of foreign-based firm taxable in India
Q.
Commonwealth Youth Programme Asia Centre is an
international/inter- governmental organisation established by the Government of India, Ministry of Education & Social Welfare in 1978. It is conferred with Section 3 of the United Nations (Privileges & Immunities) Act 1947 (46 of 1947).

New Delhi, February 19
The telecom tariff, specially the STD call rates are likely to fall significantly with telecom regulator, TRAI proposing to reduce the levy paid by private operators to BSNL by a whopping over Rs 1,900 crore.

The full TRAI is meeting tomorrow to give final touches to the new ADC (Access Deficit Charge) regime,
highly-placed sources said today adding the ADC quantum to BSNL may come down to Rs 3,143 crore annually from existing Rs 5,340 crore.

While switching over to revenue- share regime from existing per minute basis , TRAI is understood to have proposed a revenue share of 1.99 per cent of the gross annual revenue of the private operator.

Although the two telecom PSUs — MTNL and BSNL — have already announced STD calls at Re 1 across the country, but the private operators are waiting for the new ADC regime to be announced by the TRAI.

According to sources, TRAI is considering drastic cut in ADC on international long-distance calls (both incoming and outgoing). The new ADC rates for ISD calls are proposed to be Rs 1.20 per minute for an incoming ISD calls from the existing Rs 3.25 while for the outgoing ISD calls, the new rates are proposed to be Rs 0.50 a minute from existing
Rs 2.50.

With this, the recovery from ISD calls will come down to Rs 1,442 crore from existing Rs 2,109 crore.

Last week, MTNL and BSNL had announced one-India tariff as envisaged by Communication and IT Minister Dayanidhi Maran and both PSUs had anticipated that the TRAI would be announcing new ADC regime soon.

According to sources, the STD carriage charge, a crucial sector in bringing down the STD charges, is likely to come down to a flat rate of Rs 0.73 and Rs 0.62 for the next two years, respectively.

Following 2007-08, TRAI has understood to propose a flat ceiling without any distance-based rate.

TRAI may announce the new regime in day or two and would be effective from March 1.
— PTI

Bangalore, February 19
Citing the successful joint venture of India and Russia to harness the core competencies of the two nations for the benefit of humanity, the President, Dr A.P.J. Abdul Kalam, today called for a joint design, development and manufacturing of hand-held tablet PC with multilingual capability.

Delivering the 16th JN Tata lecture at the Indian Institute of Science (IISc) here, he said missions of world knowledge platform should include the convergence of bio, nano and information and communication technologies (ICT).

The world knowledge platform would also evolve a virtual design centre with the participation of collaborating countries, he added.

Dr Kalam said the world knowledge platform, in short, would be the launch pad for many innovations that were waiting to be unearthed only by the combined power of multiple nations.

He said e-business network would bring robust economy in a faster scale, business transaction, knowledge exchange, joint business operations, quick exchange of information and round-the-clock business with lesser legal constraints. Initially, the proposed e-business network between India and partner country would cater to two major segments namely business to business and business to consumer, he added hoping that IT and biotechnology institutions and IISc would take up leadership to ensure economic prosperity to the participating countries.

On the IISc, he said the prestigious institute should be known for its pioneering research at least in five areas of science and technology. Setting an agenda for the institute for next couple of decades, he said centres of excellence could be set up in multiple locations in the country and abroad for spreading the IISc brand.

He said a virtual education hub be created throughout the country to ensure that quality education from the IISc reached out to the entire nation. It could also act as a virtual collaborative hub to become a platform for scientists, researchers from the IISc, worldwide scientists and nobel laureates to share their knowledge among the students and faculty across India.
— UNI

New Delhi, February 19
Be open minded, this is an era of globalisation, is Britain’s piece of advice to its European partners opposing Mittal’s Arcelor takeover bid.

Putting his point forward, British High Commissioner Sir Michael Arthur said they could draw a leaf from British experience with globalisation.

Sir Michael said the only thing to be seen was if Mittal was a globally competitive steel-maker.

Asked about Luxembourg’s plans to bring a legislation which was aiming at thwarting the bid, Sir Michael said “Things are there very small. As a government they have part shares in the company and since they are a shareholder they are worried about employment.

Unfazed by reports that the proposed double taxation avoidance agreement (DTAA) with India could be threatened because of the Mittal takeover row, Luxembourg has said the mutually beneficial treaty should not fall “victim” to the controversy involving a business
deal.

London: European steel giant Arcelor, which is facing a takeover bid from Mittal Steel, is expected to announce this week that it has signed a deal to buy a stake in a Chinese steel-maker, as part of its defence against the $ 22.1 billion bid.

The Luxembourg-based Arcelor is thought to have hurried through the deal, which will see it pay around $ 225 million for a 38 per cent stake in Laiwu Steel.
— PTI

New Delhi, February 19
It is now official. The Finance Ministry is clueless about the income of middlemen dealing in agricultural marketing, moneylenders and wholesale traders in agricultural products, though their income amounting thousands of crores is subject to tax under the provisions of present IT Act.

Questioned by the Standing Committee on Finance, which has submitted final report to the Lok Sabha on ‘Widening of tax base and evasion of tax’, the Finance Ministry said, “Income of middlemen dealing in marketing of agricultural produce is subject to tax under the IT Act.”

The committee expressed concern over the fact that though income from non-agricultural sources from the rural areas such as moneylending, leasing of agricultural equipment, wholesale trade in agricultural produce are liable under the provision of IT Act, yet they were indulging in tax evasion worth hundreds of crores annually by showing this income as agricultural income.

Haldia, February 19
Videocon Industries Limited, a major player in the consumer electronics and oil exploration businesses, today said it is planning to venture out into overseas oil exploration.

Talking to reporters here yesterday, its Chairman V.N. Dhoot said Videocon along with four other overseas partners is in the process of entering oil exploration in Australia. He said talks were on and everything would be finalised by March 2006.

Besides Australia, Videocon is also looking at assets in the West
Asia. — PTI

New Delhi, February 19
After allowing small investors to own gold assets en route mutual funds, SEBI is set to come up with another set of guideline to enable investors reap the benefits of the real estate sector boom.

“Last year, we came up with norms on the Gold Exchange Traded Fund. This year, we will come up norms for real estate funds,” SEBI Chairman M Damodaran said referring to a long-standing demand of the realty sector.

India Inc has been demanding guidelines for real estate investment trusts (REITs) that will enable mutual funds to invest in the booming realty sector.
— PTI

Salaries of Indian employees of foreign-based firm taxable in India
by S.C. Vasudeva

Q. Commonwealth Youth Programme Asia Centre is an
international/inter- governmental organisation established by the Government of India, Ministry of Education & Social Welfare in 1978. It is conferred with Section 3 of the United Nations (Privileges & Immunities) Act 1947 (46 of 1947). The centre is also exempt from custom, excise duty and sales tax by way of international/diplomatic status. The centre as such under the government notification is exempt from direct taxes. Can the Indian employees posted in Chandigarh (Only office for the eight Asian member countries) be exempt from income tax since this centre is not registered in India and employees get salaries in convertible Indian rupees from head office in London. Please advise.

— Anil Gupta

A. According to the provisions of Section 9 of the Act, income which fall under the head salaries, if it is earned in India, shall be an income deemed to accrue or arise in India. In view of thereof, the salaries earned by Indian employees posted in Chandigarh are liable to be taxed in India. The employees may thus have to file their income tax return in case their income is more than the maximum amount which is not chargeable tax.

Section 54

Q. I have two residential houses, one at Delhi constructed in 1988 and the second at Amritsar constructed in 1974. Somebody has told me that if I have two houses and sell one of these then I have to pay income tax on the capital gain i.e. 20 per cent of the capital gain and there is no other way to save it. Is it true? Can I avail of the followings by selling one of the residential houses: -

(a) Buy another residential property in lieu of the one sold.

Or

(b) Buy bonds (recognised by the government) to save income tax on the capital gains. (Income tax saving bonds)

— A.K. Bhatia, Amritsar

A. Section 54 of the Income Tax Act 1961 (The Act), provides that in case of an assessee being an individual or a Hindu Undivided Family (HUF), the capital gain arising from the transfer of a long-term capital asset in the nature of residential house, who has within a period of one year before or two years after the date on which the transfer took place purchased or has within a period of three years of the date of transfer, constructed a residential house, then instead of capital gain being charged to income tax as income of previous year in which the transfer took place, the same shall be exempt from tax. It may be added that in case the cost of new residential house so acquired is less than the amount of capital gain earned on sale of the residential house, the exemption allowable is limited to the extent of capital gain utilised for the acquisition of the residential house.

In view of the above provisions, you can buy another residential house in lieu of the sold provided this is done within the period stated hereinabove.

You can also invest the capital gain earned on the sale of your residential house in capital gains tax saving bonds as recognised by the government. The facility of making investment in the aforesaid bonds is in addition to the exemption provided in Section 54 of the Act.

Section 80 L

Q. I am a government pensioner and a senior citizen having PAN. My total income from all sources (i.e. pension, interest and rental value of my self-occupied house) for the current year will be about Rs 1,40,000. Kindly let me know:

(a) Is it necessary for me to file income tax return for the current financial year (i.e. A.Y. 2006-07)?

(b) Can I submit declaration in form 15 H to avoid TDS?

(c) What is the status of exemption under Section 80L now?

(d) Is it necessary to show rental value of self-occupied house? If yes, how much rebate is admissible on it as maintenance expenditure and under which section?

— Y.V. Dharmani, Jalandhar

A. The answers to your queries are as under:

(a) In view of your total income being below the taxable limit specified for senior citizens, you are not required to file the return of income under Section 139(1) of the Act. However, in terms of proviso to the aforesaid section, in case you come within 1/6 scheme, it would be incumbent upon you to file the return even if your income does not exceed the maximum amount which is not chargeable to tax.

(b) You can submit the declaration in form 15H to avoid the deduction of tax at source.

(c) The exemption under Section 80 L has been discontinued and is not applicable for assessment year 2006-07 and onwards.

(d) Even though the income from self-occupied house is taken as NIL, yet it would be better to disclose this fact in your income tax return.

Capital gains tax

Q. I purchased a plot on 10.05.1994 for Rs 57,000. I spent Rs 15,860 for making boundary walls, but I have receipts of Rs 4,110 only. I sold this plot on 15.04.2005 for Rs 6,63,000. On 22.11.2004, I purchased residential house for Rs 4,49,570 and spent Rs 58,732 on its repair. On 4.01.2005, I was allotted EWS flat by Improvement Trust for which I deposited Rs 10,000 with the application on 2.09.2004, then I deposited Rs 54,200 being balance of ¼ sale price on 18.01.2005. Thereafter, I deposited Rs 1,50,000 being the balance sale price on 21.04.2005; total Rs 2,14,200. Thus I have spent Rs 6,63,770 as mentioned above.

Kindly advise: -

(a) What is the tax liability, if any?

(b) If there is any liability on me to pay tax, what remedy is available to me to save tax?

— S. Pruthi, Jalandhar

A. The answers to your queries are as under:

In accordance with the provisions of Section 54F of the Act, where in the case of an assessee being an individual or a HUF, the capital gain arises from the transfer of any long-term capital asset, not being a residential house and the assesser has, within a period of one year before or two years after the date on which transfer took place purchased, or has within a period of three years after that date constructed a residential house, the entire amount of capital gain shall be exempt if the cost of residential house is not less than the net consideration.

In case the cost of the residential house is less than the net consideration, so much of the capital gain as bears to the whole of capital gain, the same proportion as the cost of residential house bears to the net consideration would be exempt from tax. The net consideration for the purposes of Section 54F of the Act has been defined as full value of consideration received or accruing as a result of the transfer of long-term capital asset less any expenditure incurred wholly and exclusively in connection with such transfer. The proviso to said section makes it clear that the deduction under this section will be available as long as the assessee has one and not more than one house existing on the date of transfer. The proviso further requires that the above exemption shall not be available if the assessee purchases any residential house, other than the residential house acquired to save capital gains tax, within a period of one year after the date of transfer of the long term capital asset.

On the basis of the particulars given by you it is evident that as on the date of sale of plot (15.04.2005) you were owner of two houses i.e. house purchased on 22.11.04 as well as EWS flat allotted on 4-1-2005. Section 54 F of the Act, therefore, will be inapplicable in your case. You could have saved tax by investing capital gain in the acquisition of capital gain tax saving bonds within six months of the date of transfer. In case you have not done so, you will be liable to pay capital gains tax for assessment year 2006-07.

HRA rebate

Q. I am employed in LIC of India at Kurukshetra. My gross salary is Rs 19,000 per month. It also includes Rs 950 as house rent allowance. I am residing in a rented house at Kurukshetra and paying a rent of Rs 3,000 per month. Please let me know whether I am entitled to HRA rebate for Financial Year 2005-06 (A.Y. 2006-07) and how it is calculated?

— Adesh Jain, Kurukshetra

A. In accordance with Rule 2A of Income-tax Rules 1962, the amount which is not to be included to the total income of an assessee in case of the grant of HRA is least of the following: -

(a) The actual amount of allowance received

(b) The amount by which the amount actually incurred by the assessee towards the payment of rent exceeds 1/10th of the salary.

(c) An amount equal to one half of the salary where rented accommodation is occupied at Mumbai, Delhi, Kolkata or Chennai or 2/5th of the salary in case it is occupied at other places.

On the basis of figures given by you, the computation would be as under: -

The lesser of the three amounts being Rs 950 you will be entitled to the exemption of Rs 950 only being the monthly amount of HRA received by you. In other words, the total exemption allowable on yearly basis would be Rs 11,400 (Rs 950 X 12).

Rebate on donation

Q. I am a bank employee. I donate one day privilege leave to the Prime Minister’s Relief Fund as per bank’s circular. There is a circular in the bank to encash one day’s additional privilege leave for donation to the Prime Minister’s Relief Fund subject to his giving a letter to the bank to that effect and authorising the bank to remit the amount to the fund. But the manager said this amount first is your income and I will include it in your income and then you will get relief. Is it correct? How I should get the exemption? What is the provision in the Income-Tax Act? The bank has not given to me relief, but in my annual return I showed getting relief.

— Ashok Kumar, HP

A. The management of the bank has correctly pointed out that the encashed leave will have to be included as part of your income in the first instance. The rebate allowable in respect of the donation to the Prime Minister’s Relief Fund will be considered after such inclusion. The rebate in respect of such donation is to be allowed by the bank while computing tax deduction at source. In case the same has not been allowed by the bank you will have to file your return of income to claim tax rebate on donation paid to PM’s Relief Fund.